My husband and I opened a restaurant in December of 2005, under

Customer Question

My husband and I opened a restaurant in December of 2005, under a sole prop. In March of 2006, we closed the sole prop, and opened an LLC. This is how we ran the restaurant until we closed in 2008. About 4 years ago, we were contacted by an IRS agent claiming that we did not file or pay the 941 taxes under the sole prop. After further inquiries, I realized that the sole prop was never closed properly. Once I filled out and signed the proper paper work, the balance due was zeroed out. About a year later, we got notice that the 941 forms were never filed or paid under the LLC. (Ironically it was very close to the same amount that the IRS was saying the sole prop owed.) The agent working on our case, requested bank records and records from Paychex, showing that the LLC did file and pay the 941 taxes. I thought that once I showed proof of the filings and payment, that would be then end of it. Well that was 3 years ago, and now the IRS has no record of the agent that was working on our case, and they have no record of him showing proof of filing and payment, so they are still showing a balance owed. they are now requesting proof of payment, again. The years in question are 2006-2008, and since that is more than 5 years old. Paychex is not required to keep that information. (We shredded all of our records, thinking that the "issue" had been taken care of) Also, the 2 banks we were using while in business, have closed. I have had no luck obtaining statements form the accounts we had. HELP! We need to get this resolved, and don't know where to turn! I have been working with a "Tax Payer Advocate", but they have been of no help.Thanks for any advise! Sheri Derryberry

Hello and welcome. My name is Megan and I will be happy to assist you today

Megan C :

How are you doing?

Megan C :

When your bank closed, did another bank take its place? Financial institutions are required to keep records for at least 7 years.

Megan C :

I also find it very odd that Paychex doesn't keep records for at least that long...

JACUSTOMER-h1l2l2ni- :

One of the banks, M&I just closed, no bank took its place. That is the bank we used in 2007 and 2008. Washington Mutual, was the bank we used in 2005-2006. They merged with Chase, but because it has been more than 7 years, they have no records of our accounts.

Megan C :

You don't have anywhere else you can look for records?

Megan C :

Paychex should keep data for at least 7 years as well, I would think - because they have to keep track of W-2 information

Megan C :

Do you have copies of the 941 forms that were filed?

Megan C :

And they should have records from November 2006 forward. So in worst case scenario you should only have to worry about the taxes due from Jan 2006 to November 2006.

Megan C :

Employment tax records should be kept for 4 years, according to the IRS website. However, they are saying that you did not even file a return so they can still assess tax

My best advice to you would be to hire a local accountant to assist you in this matter, because it's not going to be easy to fight the IRS on this one. The Taxpayer advocate is typically only used when you are having trouble with the IRS itself - they would not help you prove or disprove that you paid certain expenses

JACUSTOMER-h1l2l2ni- :

I never kept the copies.....once we closed the business, and moved out of state, we just got rid of everything. When the IRS agent requested info, it came straight from Paychex and the banks.

Megan C :

A few hundred dollars for a tax professional is better than thousands of dollars of payroll taxes

Megan C :

Do you have any more questions?

JACUSTOMER-h1l2l2ni- :

Yes, what exactly can a tax professional help me with? I no longer have proof.

Megan C :

Well, they can look at what you do have and maybe help you come up with a different way of proving that you paid the taxes. Do you have business logs? A checkbook register? Accounting records? Anything?

Megan C :

Unfortunately, the burden of proof is on the taxpayer. You can CLICK HERE to read about burden of proof.

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. OrvilleHesperia, California

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